The new managers of the economy need to take another look at heavy fines given to key private sector operators by regulatory bodies.
This becomes crucial as the high cost of doing business in Nigeria is also a major challenge to both private sector operators and potential foreign investors.
Therefore, the new managers of the economy need to act in earnest before local and foreign investors begin to see the trend as a deliberate ploy by government to shore up its revenue base as oil prices continue to fall in the global market.
Before it gets out of hand, the Federal Government should be reminded that businesses left Lagos State in droves and relocated to other states and neighbouring countries when the state government, in the past, tried to increase its internally generated revenue by ensuring that operators in the private sector pay all manner of taxes and fines.
The state had adopted this method when the Federal Government decided to withhold part of its monthly federal allocation over a disagreement on the creation of additional local governments (LGAs) by the state.
The huge fines placed on minor infractions like traffic offences or major ones like failure to remit taxes due to the state caused some uproar at the time but the state insisted on having its way. Some companies had to move out of the state and that depleted state revenue earnings at that time.
At the federal level, the consequence of ongoing rise in regulatory fines is bound to carry a bigger cost. The similarity in the condition of the finances of the Federal Government today and that of the Lagos State Government between 2004 and 2007 implies that the current spate of huge fines may not be mere coincidence.
It may be a grave miscalculation for the Federal Government to believe it can duplicate the survival strategy adopted in Lagos State when the state’s monthly allocations were withheld by the Federal Government under former President Olusegun Obasanjo .
Instead, Nigeria’s economic managers must recognise that burdensome regulatory environment is anathema to the emergence of a stronger private sector.
Undoubtedly, businesses will only thrive in an environment where salutary regulatory controls are in place. But the parallel between the timing of huge fines on businesses by regulatory bodies and the experience of businesses in Lagos State about a decade ago brings to mind the suggestion that the fines may be an ingenious bid to survive the dispensation of tight fiscal policy and diminishing budgetary funding from the federal purse.
The huge civil penalty of N100 million slammed on Coca-Cola Nigeria by the Consumer Protection Council (CPC) in 2014 caught many unawares and set the stage for the current spate of huge fines. The penalty was seen as heavy-handed even by CPC standard.
Since Nigerians were not informed whether Coca Cola Nigeria paid the hefty fine or not, it seems other regulatory bodies were emboldened by the development.
Recently, the Financial Reporting Council (FRC) fined Stanbic IBTC Bank N1 billion and requested that the Central Bank of Nigeria (CBN) and the Economic and Financial Crime Commission (EFCC) investigate the bank and KPMG Professional Services for “financial misstatements” in the lenders 2013 and 2014 accounts.
The Council also suspended the registration of four directors of Stanbic IBTC and that of its audit engagement partner, KPMG Professional Services, until KPMG’s innocence is ascertained. The four directors suspended are Atedo Peterside, Sola David-Borha, Arthur Oginga and Dare Owei.
The Nigerian Communications Commission (NCC) also imposed a N1.04 trillion fine on MTN Nigeria for failing to disconnect 5.2 million unregistered SIMs on its network. The CBN equally imposed a N4 billion fine on Skye Bank Plc; N1.87 billion fine on First Bank of Nigeria and N2.94 billion fine on United Bank for Africa for their alleged failure to comply with the regulator’s directive on Treasury Single Account (TSA). All the banks have paid the fines.
Another major player in the private sector, Guinness Nigeria Plc, joined the rank of multinational victims of regulatory fines as it was fined N1 billion by the National Agency for Food and Drug Administration and Control (NAFDAC).
Guinness Nigeria Plc said the alleged regulatory infraction relates, in part, to the destruction of expired raw material without the authority and supervision of NAFDAC.
Diageo, owners of Guinness, said it did not fully understand the basis for the fine, nor the particular regulations infringed but was in talks with NAFDAC to resolve the matter.
Curiously, a review of the NAFDAC Act shows that the highest penalty that it can charge for the infraction against Guinness Nigeria is N100, 000 per infringement.
If this is so, does it then mean that Guinness Nigeria committed 10,000 infringements before NAFDAC decided to act? This is most unlikely. NAFDAC, like other regulatory agencies, must understand that multinational companies play by a different set of rules and except where the Chief Executive Officer is criminally inclined, they subscribe to a strict code of corporate governance.
It is incontestable that the contribution of the private sector to the growth of the economy may be affected if regulators become overbearing and are left unchecked.
Nigeria must avoid a situation whereby major business concerns that are engaged in legitimate dealings would begin to wonder who is next in line for huge sanctions by regulatory bodies.
- Okoya, a former executive editor of Marketing Edge, lives in Lagos.
